Technical Glossary / Chart Patterns
Inverse Head and Shoulders
A decline, a lower decline, and a higher low, with a neckline through the two highs between them.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
The inverse head and shoulders is the bullish mirror. Left shoulder, a lower head, and a higher right shoulder. The neckline joins the intervening highs. A close above the neckline completes it.
How to identify it
Three troughs, the middle one lowest, then a push through the line of the two peaks. Volume, if you use it, often expands on the break, but the price break is the rule.
Bullish reading
Traders plan a distance similar to the head-to-neckline depth, added above the break. Invalidation is a return under the neckline or under the right shoulder.
Bearish reading
Failure back under the neckline puts the downtrend back in charge. Do not keep the bullish name after that close.
Common mistakes
Buying the right shoulder before the neckline breaks, and calling the pattern complete.
Limitations
The pattern needs a prior decline. In a trading range, three troughs are just a range.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.